Shares of China State Shipbuilding Co., set to become the country's biggest shipbuilder, extended three days of gains to a record after the company's new name fueled optimism it will further benefit as the industry reorganizes.
The stock rose 3.1 percent to 191.90 yuan in Shanghai, the highest share price in mainland China. The shares, which earlier climbed as much as 7.8 percent, have gained 23 percent since Aug. 1, when the maker of ship engines changed its name from Hudong Heavy Industry Co. and appointed a new chairman.
The company is in the midst of buying Shanghai Waigaoqiao Shipbuilding Co., China's biggest shipyard, from Beijing-based parent China State Shipbuilding Corp. The new name reinforces the key role the manufacturer will have as China's yards boost profit and expand production capacity amid surging orders for vessels.
``Changing names means a lot for the company, especially in the long run,'' said Andy Meng, a Shanghai-based analyst at Morgan Stanley. ``It means the company will be the major platform for the overall group restructuring.'' Meng rates the shares ``overweight/in-line.''
Profit at Chinese shipyards surged 151 percent to 6.4 billion yuan ($846 million) in the first half as sales jumped 54 percent to 80.7 billion yuan, the China Association of the National Shipbuilding Industry said Aug. 3 on its Web site. Orders rose 165 percent to a record 42.6 million deadweight tons.
Even at today's all-time-high, China State Shipbuilding's market value of 50.4 billion yuan ($6.7 billion) is less than a fourth the 26.6 trillion won ($29 billion) value of South Korea's Hyundai Heavy Industries Co., the world's biggest shipbuilder.
China State Shipbuilding's shares traded today at 127 times 2006 earnings, compared with Hyundai Heavy's 28 times, according to Bloomberg's data. The Chinese company's earnings may increase this year, after it announced on Jan. 29 a plan to sell 12 billion yuan of shares to investors in exchange for shipbuilding assets including the Waigaoqiao yard. Hyundai Heavy gets about half of its sales from shipbuilding.
China State Shipbuilding Co. appointed Chen Xiaojin as its new chairman, the company said in an Aug. 1 statement to Shanghai's stock exchange. He's also general manager at China State Shipbuilding Corp., the parent.
The parent may sell its affiliate more assets than previously announced, the Shanghai Securities Journal reported on July 30.